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Cost Benefit Analysis. Executive Order 12291. RIA for all new regulations Benefits > Costs Office of Information and Regulatory Affairs (OIRA) in OMB 1984- 58 rules “sent back”. Executive Order 12866. Perform RIA for “significant regulations” > $100 million

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executive order 12291
Executive Order 12291
  • RIA for all new regulations
  • Benefits > Costs
  • Office of Information and Regulatory Affairs (OIRA) in OMB
  • 1984- 58 rules “sent back”
executive order 12866
Executive Order 12866
  • Perform RIA for “significant regulations” > $100 million
  • “Costs and benefits should be understood to include both quantifiable measures ... and qualitative measures of costs and benefits that are difficult to quantify.”
  • Maximize “net benefits to society
  • 1992-00, 16 rules sent back
statutory requirements var
CBA Okay

Safe Drinking Water Act (1996)

Environmental Impact Statements

CBA Never

Toxic Substance Control Act

RCRA

Clean Air Act

Clean Water Act

Statutory Requirements Var
phasedown of lead in gas
Phasedown of Lead in Gas
  • “Cadillac” of cost benefit analysis
  • How to estimate benefits?
  • Would you rather be a lion or horse tamer?
section 812 study
Section 812 Study
  • Was the CAA worth it?
    • 1990 benefits of CAA $1.25 trillion
    • 1990 US Economy GDP 5 trillion
  • “Assumptions underlying the estimates are often unavoidably arbitrary, they have large effects on the final results, and the effects are not always well explained.” Randall Luttner, Brookings Institute
section 812 baseline
Section 812 Baseline
  • No improvement in air without CAA
    • 60 metro areas have higher PM in 1990 than Moscow
  • 1970 baseline  benefits?
pm mortality
PM Mortality
  • Where is PM?
  • Where is Grandma?
value of a life year
Value of a Life Year
  • $ Value of Reducing Mortality in years of life gained
    • $293,000 or
    • $100,000
  • $ benefits
    • $16.6 trillion or
    • 9.1 trillion
particulate matter mortality
Particulate Matter Mortality
  • EPA- Reducing PM exposure = gain 14 years
  • FDA- quitting smoking = gain of 15 years
value of life
Value of Life?
  • $6.1 million EPA
  • $2.5 million DOT
  • $5 million Consumer Product Safety Commission
spaceship survivor
Spaceship Survivor
  • Me, you, baby, and a 72 year old lady on spaceship, only enough O2 for 3 people. Who do you toss?
oira alternative estimates for a statistical life
OIRA “alternative estimates” for a statistical life
  • $2.3 million >70

Impact on BCA of air pollution?

past predictions of costs of regulations
Past Predictions of Costs of Regulations

28 Major Regulations (accuracy = + 25% of estimate)

why do cba
Why do CBA?
  • Is CBA inherently
    • Stupid?
    • Deceitful
    • Anti-environmental?
  • Examples Saving Lives and Saving Turtles
conclusions
Conclusions
  • Thresholds
  • Benefits > Costs
  • Useful for assessing regulatory impact
  • Incomplete tool